Which type of mortgage loans are guaranteed and insured by the government?

The choice of FHA and VA loans as the correct answer reflects the specific nature of these loans being backed by the government. FHA loans, or Federal Housing Administration loans, are designed to help low to moderate-income borrowers access affordable housing. They require lower down payments and have more flexible credit score requirements compared to conventional loans. Because they are insured by the FHA, lenders are provided with a safety net, which makes them more willing to lend to borrowers with fewer financial resources.

VA loans, on the other hand, are guaranteed by the U.S. Department of Veterans Affairs and are exclusively available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves. These loans typically require no down payment and do not involve private mortgage insurance, making them a significant benefit for those who qualify.

In contrast, conventional loans are not guaranteed or insured by the government but rather rely on private sources. Private loans also do not involve any government backing and are typically issued under different terms and conditions than government-backed loans. Home equity loans are secured against the equity in a borrower’s existing home, rather than being a type of mortgage loan that is backed by the government. Thus, FHA and VA loans being specifically government-backed makes this choice the most accurate